What corporates look for in a start-up?
Akina Ho, Head of Digital Transformation and Innovation at Great Eagle, as well as a board member of the Hong Kong PropTech Association (HKPTA), says collaborations with start-ups are growing in importance as laggards risk being disrupted by rivals or new incumbents who embrace an open innovation strategy.
“Developers nowadays are keener than ever to look at what start-ups have to offer and how they can help them digitally transform the way they operate and do business,” she says, noting that there are generally three criteria for a developer to decide if it is going to work with an external start-up.
“The solution being offered is judged if it is a value-add (like new revenue stream), if it can drive cost efficiency, improve performance or if it can help achieve sustainability,” Ho explains, but cautions that certain corporate culture and business practices can kill innovation.
Mind the gap
“Their culture is different; language is different; speed is different. In a corporate setting, it could take nine months or a year to do research and decide if a solution can be deployed or not. By contrast, a start-up cannot wait that long. A start-up makes a decision in a few days and start executing the very next day. And then they try it out, test if it works. If it doesn't work out, then they move on with the lesson learned from the failed attempt and pivot into a new improved method. Start-ups can’t afford to wait weeks or months to make a decision and then try it out. Urgency is vital for a start-up’s survival.”
For a large conglomerate, however, the attitude is different — there is little sense of urgency. Ho warns to bear in mind that those failing to embrace innovation's transformative power risk falling by the wayside and cites the demise of Blackberry as a textbook example of how complacency can destroy any business.
Their legal and financial languages differ too. “Large companies can have a legal team spending a few months to hammer out an NDA (non-disclosure agreement) to protect their interests, giving them every tool to sue the supplier if necessary and that the start-up cannot sue the corporation. But most start-ups cannot afford the same level of legal protection nor spend 3 months on an NDA. Most start-up’s main concern is not to be sued by the company and that the company doesn’t steal it’s invention or proprietary intelligence.”
Another discrepancy in expectations is that corporates expect new suppliers to offer a free trial and hopefully a deep discount for a full deployment if not free vs. start-ups believe that free trials get their foot in the door with market leaders but eventually they will get paid at reasonable price if a full deployment of their solutions is going to commence. The reality is that this model puts start-ups in a difficult situation. “Even if the start-up is asked to do a proof-of-concept (PoC), it still costs them money. So the start-up do expect to get paid fairly at the end and that is the only way they can survive and continue to innovate.”
Internal politics, turf wars, cultural issues and lack of budget and talent are among the common barriers to open innovation in large companies. “Cutting through this complexity is not easy. Change is not easy. There are always one third of people who want change, one third who sit on the fence, and one third who are reluctant to change at all. Pursuing innovation is not just about allocating resources, but also about changing corporate culture.”
Wearing two hats, Ho understands the concerns of developers and what proptech start-ups look for in collaboration. “My dual role is to help start-ups get over these barriers on the one hand, and on the other hand to convince corporate partners to understand start-ups’ difficulties if they really want to try out new things at relatively zero upfront cost and support innovation in the sector.”
Mindset changes critical to bridging the gap
Playing on the other side of the table, Harris Sun, CEO and founder of RaSpect, calls for a change in mindset among corporate partners, urging them to not only treat start-ups as vendors but also to invest in and grow with them...
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